Finance Committee Approves Bennet-Burr Bill to Level Playing Field for LNG

Bill Would Equalize Tax Treatment to Put Competing Fuels on Fair Footing

Washington, DC - The Senate Finance Committee today approved a bipartisan bill introduced by U.S. Senators Michael Bennet (D-CO) and Richard Burr (R-NC) to put liquefied natural gas (LNG) on equal footing with diesel fuel under the federal highway excise tax. The bill would allow LNG to compete fairly with diesel by taxing LNG on energy output rather than per gallon.

"We have an opportunity to help grow this market and increase the use of natural gas as a transportation fuel," Bennet said. "We've watched our domestic energy markets undergo a drastic change over the last decade, and this bill will help harness that momentum. It will also encourage more consumers and business owners to use LNG-powered vehicles that can help keep our air cleaner. We'll continue to work with our colleagues to get this passed by the full Senate."

"Congress shouldn't be in the business of picking winners and losers - this legislation would ensure that natural gas is on the same playing field as other energy resources," said Burr. "Natural gas represents a way to boost our nation's energy security and help free us from our over-reliance on foreign oil."

The current tax system for LNG can result in thousands of dollars of additional cost for companies choosing to use the fuel. For example, if a diesel truck travels 100,000 miles at 5 miles per gallon it consumes 20,000 gallons of diesel fuel. However, an identical LNG truck would require 34,000 gallons of LNG to travel the same distance. The current tax system would result in the LNG truck operator paying an additional $3,402 in taxes because of the 14,000 gallons more of fuel to travel the same distance.

The fuel has attracted the attention of fleet operators due to its low cost at the pump and reduced environmental impact. LNG produces significantly lower levels of toxic emissions than diesel fuel, including lower levels of carbon dioxide, nitrogen oxide and sulfur dioxide. Using LNG instead of diesel fuel also reduces pollution from so-called "black carbon," also known as soot. Black carbon is a major contributor to climate change, second only to carbon dioxide in the amount of heat it traps in the atmosphere once emitted.

In addition to the environmental benefits of the fuel, LNG is cheaper at the pump than diesel but is effectively taxed at a higher rate. Currently, the excise tax rate for both LNG and Diesel Fuel is set at 24.3 cents per gallon, however LNG produces less energy per gallon than diesel fuel. It takes about 1.7 gallons of LNG to equal the energy in 1 gallon of diesel fuel, resulting in LNG being taxed at 170% of the rate of diesel fuel on an energy equivalent basis. Taxing LNG based on energy output versus volume removes a disincentive to use the fuel.

A 2013 study commissioned by the Small Business and Entrepreneurship Council shows that increased international demand for LNG has had a positive impact on the nation's economy, particularly in Colorado. Colorado's natural gas production has risen by almost 45 percent resulting in large numbers of job growth particularly for small and midsize businesses in the state.

# # #